USA: Employment growth falters, cautious outlook for the economy

 

The US labour market continues to be on the road to recovery. However, the steps are now becoming much smaller. According to the official labour market report, the number of people in employment rose by 1.8 million in July compared to the previous month. Especially companies in the leisure and lodging industry as well as the government contributed to the increase in employment. Still: in June, far more than twice as many jobs were created overall! Nevertheless, the unemployment rate fell from around 11 per cent in June to 10.2 per cent. But here too, the pace has now slowed down considerably.

The latest developments on the labor market underscore the gloomy outlook for the US economy: the economy needs private consumption as a driving force out of the crisis. However, if the reduction in unemployment falters, consumer spending will only slowly return. That is what it looks like at the moment. Hopes for a steep recovery of the US economy are thus dampened.

A significantly higher number of new hires will probably only reflect this once the uncertainty for companies subsides. This is also evident from the ISM surveys in the private sector: although the purchasing managers‘ indices rose again in July at a relatively high level, the number of new hires is still too low. However, companies have been very cautious about their employment intentions, and the survey even shows that staff cuts are still taking place in both manufacturing and the service sector. In order for this to change, the corona virus in particular would have to be brought under control – but it is hardly foreseeable at present that this will be achieved quickly.

It remains difficult for the 16 million or so unemployed to find a new job soon. This increases the pressure on Congress to quickly reach an agreement on an extension of federal subsidies for unemployment benefits. After all, this would give many households some financial security.

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